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NEW YORK: Oil dropped 4% yesterday as financial market turmoil stoked concerns about fuel demand and sent investors seeking safer havens.
US crude traded down $3.82 to $94.671 by 1.47pm EDT (1747 GMT) after touching a low of $94.02 earlier. London Brent fell $3.83 to $91.50 a barrel.
Shockwaves from the global credit crisis spread, threatening industry and jobs worldwide and pressuring the US Congress to finish up a $700bn bailout of the US financial sector.
The growing financial crisis have added to concerns about oil demand, which has slumped in industrialised countries like this US this year, sending crude prices crashing from record highs over $147 a barrel hit in July.
“People are worried about demand deterioration (and) the economy falling into recession,” said Tom Knight, trader for Truman Arnold.
Additional pressure on crude prices came as investors – who had flocked to crude and other commodities earlier this year as a hedge against the weak dollar and inflation – unwound positions.
“We are continuing to see funds unwinding positions. This has not only affected speculators but also the commercial side of the trade in view of problems related to credit constricting,” said Gene McGillian, analyst for Tradition Energy.
Dollar gains against the euro and other currencies also helped push down crude. US government data showing rising inventories of crude, gasoline and natural gas as oil infrastructure recovered from Hurricane Ike, also weighed on prices.
Metals and grains tumbled as fear that a slowdown in economic growth will hurt demand for commodities overwhelmed cautious optimism over a $700bn rescue plan awaiting final approval from lawmakers.
Gold futures fell nearly 5% as the dollar rose to its highest level in more than a year against the euro and a basket of major currencies after the European Central Bank opened the door for its first rate cut in five years.
US December gold fell $40.80, or 4.6%, to $846.30 an ounce at the New York Mercantile Exchange.
Spot gold was $841.40 an ounce, down from Wednesday’s close of $868.75. – Reuters